Mercedes cuts 2026 car margin guidance to 2-3% as China sales slump

Guidance cut for the car division

Mercedes-Benz lowered its 2026 profit outlook in a mandatory filing published on 27 October 2026, citing a market in China that it describes as increasingly challenging, along with higher costs in the fourth quarter, including material costs. The adjusted return on sales for the Mercedes-Benz Cars division is now expected at 2% to 3%, down from the earlier range of 3% to 5%. The vans unit keeps its 8% to 10% target, and Mercedes-Benz Financial Services keeps its 12% to 14% adjusted return on equity goal. Operating profit is now expected to match the prior year rather than rise significantly above it, a change that would otherwise have meant growth of at least 15%. The cuts also put at risk the targets of the restructuring programme that CEO Ola Källenius launched under the name Next Level Performance. Volkswagen and BMW had also cut their outlooks after sales in China declined.

Previous range low3%

Previous range high5%

New range low2%

New range high3%

Previous range low

3 %

Previous range high

5 %

New range low

2 %

New range high

3 %

Data from the article text

Third-quarter figures

Selected third-quarter figures were released alongside the revised outlook. Operating profit reached 1.77 billion euros, above the market expectation of 1.6 billion euros. The cars division posted an adjusted return on sales of 2.5%, roughly in line with analyst forecasts, while the vans division reached 9.4%, above estimates. Industrial free cash flow for the quarter came to 172 million euros. The figures largely met analyst expectations but did little to lift investor sentiment. Mercedes-Benz will present its full quarterly results on Wednesday, 28 October 2026.

Cars2.5%

Vans9.4%

Cars

2.5 %

Vans

9.4 %

Data from the article text

China sales and competition

Mercedes-Benz sales in China fell 31% in the third quarter to about 86,000 vehicles. For the first nine months, sales stayed below 300,000 vehicles, the lowest level since 2015. For comparison, Mercedes sold almost 800,000 cars in China across the whole of 2020, a record year for the company there. Deliveries in the first nine months were down 29%, according to Handelsblatt. The company faces fierce competition and reluctant buyers, and higher US import tariffs have pushed it to grant larger discounts. The average selling price of its cars has dropped significantly.

Costs, tariffs and cash flow

Mercedes expects tariff burdens to keep rising from the roughly 1 billion euros recorded in 2025, and exchange rate effects are also expected to weigh on results. Severance payments under mutual termination agreements add pressure on industrial free cash flow, which is expected to edge down again after falling from 9.2 billion euros to 5.4 billion euros last year. Finance chief Harald Wilhelm still points to an inflow of more than 4 billion euros. Mercedes also plans to spend 1 billion euros on share buybacks until April 2027.

Market reaction and analyst view

Shares fell about 4% in the first reaction and more than 5% at times after the revised outlook, and they have lost more than a third of their value since the start of the year. The sector also weakened, with losses for Volkswagen and BMW in Frankfurt and for Stellantis in Paris and Milan. Analyst Tom Narayan of the Canadian bank RBC said China remains the core problem for Mercedes. He argued that the market had already anticipated much of the outlook cut, so he expected only limited further pressure on the share price.